Why Is Entrepot Trade Called Transit Trade? What Are Its Core Definition and Attributes?

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  • Aug 22, 2026 at 21:48
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I am a foreign trade merchant in Shanghai specializing in exporting building materials to Southeast Asia. Recently, I have been handling an order of tiles shipped from China to Brazil with transshipment in Malaysia. My freight forwarder mentioned "transit trade" and "re-export trade", while the client called it "passing trade", which completely confused me.

In the past few days, because I could not figure out the corresponding compliance requirements for these names, I filled out the customs declaration form incorrectly twice, and was issued an alert by customs. I am so anxious that I can't sleep now.

I just want to understand why entrepot trade has so many different trade names? Are the requirements for these names different in customs declaration, foreign exchange receipt and payment, and tax refund? Will it affect the smooth shipment of this order?

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Expert Q&A

Daniel Xu
Daniel XuYears of service：10Customer Rating：5.0

Director of Import & Export OperationsStart a Chat

First of all，we need to point out a common industry misconception: many practitioners use entrepot trade，transit trade and re-export trade interchangeably，assuming they are the same type of trade，which is the core cause of compliance risks.

This confusion of concepts will trigger a chain of negative consequences: for example，incorrectly declaring entrepot trade as passing trade will lead to incorrect trade mode code on the customs declaration form，triggering manual document review by customs，cargo detention at the port，and even fines for suspected false declaration. In the foreign exchange receipt and payment link，the application will be rejected by the bank due to discrepancy between the trade mode and documents，affecting cash flow. In the tax refund link，you will fail to pass the filing due to inconsistent trade type，resulting in direct loss of tax refund.

Physical risk isolation measure: sort out the title transfer points of the order immediately. If the title of goods is transferred at the transshipment port，it belongs to Entrepot Trade，if it is only for transshipment and the title of goods is not transferred，it is transit trade，if the goods enter the customs territory first and then are re-exported，it is re-export trade. After clarifying the boundaries，rematch the corresponding trade codes.

Exclusive loss mitigation tip: contact a professional agent to obtain the Shanghai Customs trade mode code correspondence list，revise the customs declaration form according to the title of goods and logistics path of the order，and submit an explanation letter to customs to apply for canceling the alert record，to ensure full consistency between documents and trade mode.

Reference: Analysis of Core Benefits and Applicable Scenarios of Shenzhen Entrepot Trade
Michael Zhang
Michael ZhangYears of service：6Customer Rating：5.0

Customs Declaration & Compliance ExpertStart a Chat

From the perspective of customs declaration, the official code for entrepot trade is "1200", corresponding to the official name "Entrepot Trade". If "Transit Trade" refers to pure transportation transshipment without title transfer, it corresponds to the transshipment remark under code "0110" (General Trade), or the transshipment scenario under code "1039" (Market Procurement Trade). The core difference between the two lies in whether title transfer occurs at the transshipment node.

If entrepot trade is incorrectly declared as transit trade, it will lead to deviation in customs valuation logic: entrepot trade requires declaration of resale price difference, while transit trade only requires declaration of transportation fees. Once inspected by customs, you will be required to supplementary declare the price difference, resulting in late declaration fees. In severe cases, the enterprise will be listed as a key monitoring enterprise, affecting the customs clearance speed of all subsequent orders.

Eric Zhou
Eric ZhouYears of service：6Customer Rating：5.0

Senior Manager of Foreign Exchange & Tax RebatesStart a Chat

From the perspective of international logistics path, "Entrepot Trade" corresponds to the completion of title delivery at the transshipment port, and the logistics link requires issuing the bill of lading of the transshipment port to the final buyer, while "Passing Trade" only means that the goods pass through a third country, the title of goods is always held by the original seller, and only a through bill of lading is required for logistics. Confusing these two names will lead to wrong bill of lading endorsement: for example, if you operate according to entrepot trade but issue a through bill of lading, the final buyer will claim the title of goods directly from the original seller, causing title disputes.

At the same time, the terminal at the transshipment port will detain the goods because it has not received the document exchange instruction, resulting in high detention fees. During operation, you need to clarify the title instruction at the logistics node, inform the freight forwarder of the trade type when booking space, and require the corresponding bill of lading to be issued.

Victor Sun
Victor SunYears of service：5Customer Rating：5.0

Trade Risk Control ManagerStart a Chat

From the perspective of international taxation, when entrepot trade is also called "re-export trade", it is necessary to distinguish whether there is a domestic VAT obligation: if the goods do not enter the Chinese customs territory and are directly shipped from overseas to the transshipment port and then to the destination country, it belongs to offshore entrepot trade, and there is no need to pay domestic VAT; if the goods enter the customs territory and then are re-exported, it belongs to re-export trade, and you can apply for VAT deferment or tax refund. If offshore entrepot trade is incorrectly declared as re-export trade, it will lead to overpayment of VAT and increase costs.

On the contrary, you will be inspected by the tax authority for failing to perform the declaration obligation. You need to submit a trade path description to the tax authority in advance, clarify whether the goods enter the customs territory, and match the corresponding tax treatment method.

Jason Wu
Jason WuYears of service：10Customer Rating：5.0

International Logistics & Supply Chain ManagerStart a Chat

From the perspective of foreign exchange receipt and payment compliance, the foreign exchange receipt and payment of entrepot trade needs to match the capital flow of "collect first then pay" or "pay first then collect", and the amount needs to be consistent with the price difference of the resale contract, while the foreign exchange receipt and payment of "transit trade" directly corresponds to the original contract amount, with no price difference.

Confusing the names will lead to wrong filling of the trade type field in the SWIFT message, which will be intercepted by the bank's anti-money laundering system, resulting in the failure of funds to be received or paid, and even being listed as a suspicious transaction, affecting the enterprise's foreign exchange settlement qualification. During operation, you need to submit documents such as resale contract and transshipment bill of lading to the bank before foreign exchange payment, clarify the trade type, and ensure that the capital flow is consistent with the document flow.

Andy Guo
Andy GuoYears of service：3Customer Rating：5.0

Supply Chain Management ExpertStart a Chat

From the perspective of legal contracts, the difference in the name of entrepot trade will affect the setting of contract terms: if "transit trade" is written in the contract, the title transfer is between the port of departure and the port of destination, and the transshipment port is only responsible for transportation; if "entrepot trade" is written, it is necessary to set the title delivery clause at the transshipment port, and clarify the responsibilities of both parties at the transshipment port, such as who bears the storage fee and insurance fee of the goods at the transshipment port.

Confusing the names will lead to inconsistency between contract terms and actual operation, and you cannot claim rights based on the contract in case of disputes, and even suffer title loss due to vague contract terms. You need to revise the trade type expression in the contract according to the actual trade process, and clarify the division of responsibilities at each node.

Grace Wang
Grace WangYears of service：10Customer Rating：5.0

Senior Foreign Trade ConsultantStart a Chat

From the perspective of supply chain structure, different names of entrepot trade correspond to different supply chain layouts: "Transit Trade" is suitable for building pure logistics transshipment nodes, and there is no need to set up a physical company at the transshipment port; "Entrepot Trade" (including re-export trade) is suitable for setting up an offshore company at the transshipment port for title delivery and capital settlement, to optimize tax costs.

Confusing the names will lead to wrong supply chain layout: for example, if you set up an offshore company for a transit trade layout, you will increase unnecessary operating costs; on the contrary, you will not be able to take advantage of the tax preferential policies of the transshipment port, reducing the profit margin. You need to match the corresponding trade type and supply chain structure according to the long-term business plan.

Note: We respect all users' expressions; however, user comments represent their personal views only.

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